Ofcom shakes up fibre broadband market to reduce prices

BT is to face stiffer superfast fibre broadband competition from other suppliers as a result of an Ofcom review of the market.

Under proposals for consultation, the wholesale cost of switching a customer from one superfast broadband supplier to another would fall by up to 80 percent.

In addition, the minimum length of the wholesale contract between BT and the switched customer’s new supplier would be reduced from a year to just one month.

Ofcom said: "The proposals are designed to promote competition in the superfast broadband market at the wholesale level. These would be expected to flow through to consumer benefits in the form of lower retail prices and easier switching between superfast broadband providers."

Ofcom is also consulting on ways to ensure that the performance of BT’s network access division, Openreach, "is maintained at acceptable levels". Openreach installs and maintains connections to BT’s network on behalf of competing telecoms providers.

"These proposals are intended to establish clear targets for fault repairs and the installation of new lines for the millions of telephone and broadband users who rely indirectly on Openreach," said Ofcom.

Currently, if a consumer wishes to change their superfast broadband provider, the company they are switching to must pay a £50 fee to Openreach – a charge which is often passed on to the customer.

Ofcom is proposing to cut the switching fee to between £10 and £15 and reduce the minimum length of the wholesale contract between BT and the new supplier from a year to one month – providing flexibility to allow telecoms providers to offer shorter-term contracts.

The measures form part of Ofcom’s Fixed Access Market Reviews, a wide-ranging consultation on the wholesale telecoms market. A consultation on the switching changes ends on 25 September, and confirmed changes will come into force from next April.

Different broadband providers can retail their own superfast services over BT’s network under a process known as "virtual unbundled local access" (VULA), which was introduced by Ofcom in 2010.

At that time there were fewer than 100,000 superfast broadband connections on the BT network. By last year that number had risen to 1.4 million, and take-up is expected to increase further over the coming years as a result of BT's ongoing £2.4 billion fibre broadband roll-out.

Also, the government's £500 million rural fibre broadband programme is boosting superfast broadband availability, with BT winning all the contracts to build networks, but selling access to other suppliers on a wholesale basis.

Today’s consultation proposes not to set controls on the wholesale price through VULA. Ofcom believes the price of fibre broadband is "currently constrained by the availability of standard broadband services", and by competition from Virgin Media’s superfast cable network.

Ofcom is also concerned not to undermine the investment case for rolling out fibre. Instead, Ofcom proposes to maintain a requirement that BT’s charges for access to its fibre network are "fair and reasonable".

A BT spokesperson said: "We are pleased that Ofcom is maintaining pricing freedom for Openreach's fibre products.

"BT has already accepted a long payback period for its fibre deployment and its wholesale fibre prices - which are amongst the lowest in Europe - reflect this.

"Openreach is committed to delivering high levels of customer service. Openreach is already highly transparent in its service level reporting to industry and agrees this detail should be shared with consumers and businesses."


Copyright © 2013 IDG Communications, Inc.

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